The Latest in Crypto

Plus, why Ric & Jean built their firm the way they did 

 Ric Edelman: It's Monday, November 4th, almost election day. If you haven't voted yet, I hope you do tomorrow. That's when I'm going to go vote.

We're heading off to Arizona right now to hear from Alexandra. She sent in this question:

Alexandra: What made you start your financial planning company? Why did you choose the fiduciary route? I have been able to find out a lot about what you have done and how you have done it, but I wonder if understanding why you did it would help those who want the same. Thank you for your time and energy.

Ric Edelman: Alexandra, thanks so much for your question. I appreciate your asking something, near and dear to my heart and to Jean's heart. We started our financial planning firm way back in 1986, after a really dreadful experience we had as newlyweds. We were a young couple, newly married, I guess for a few years by then.

And, like most newly married young couples, we aspired to own a home. And we didn't know anything about how to buy a home. So, I was writing in the financial trade press. I was, an editor and writer and, that experience had taught me enough to know, gee, we should go talk to a financial advisor, get some help on this.

So we did. And this advisor promptly told us to commit a felony. Yeah, it's a story we've told for many, many years. We were shocked. He told us to lie on our mortgage application in order to qualify for the loan. What he should have told us is that we weren't ready to buy a house and here's what to do in order to get ready, you know, here's how much money you  need to save and here's how to save it and where to save it, et cetera.

Instead, he said, lie on the application to qualify for the loan. We were so aghast. We were so angry and astonished at that advice. You know, we turned to each other and said, you know what, if this guy can make a living giving that kind of advice, maybe we should just learn how to do this ourselves.

And then let's teach others how to do this as well. Let's teach them what we've learned. And that was the impetus. That's why we started our firm. We didn't want to go join another financial planning or investment company or brokerage firm. I mean the quality of advice that matched what this guy was offering

So we said we're gonna figure this out. We're gonna learn how to do it for ourselves. We'll teach others what we have now discovered, and we'll do this in our own organization. And we will treat clients the way they need to be treated the way we would have wanted to have been treated by this guy.

And being a fiduciary, a term we really didn't even know back in the fiduciary means you are required by law to serve the client's best interest. Lawyers are fiduciaries, doctors are fiduciaries. We wanted to be professionals and serve in that way. It never occurred to us to serve in any other way than that. It was only after we began our financial planning practice and were in this business for a number of years that we began to realize this isn't how most people behavein the financial services industry. They aren't looking out for the client's best interest. They're looking out for their own.

And this is why we all love to hate the financial services industry. We hate banks. We hate insurance companies. We hate brokerage firms. We hate credit card companies because we know they're not serving our best interests, they're serving their own. And they're doing it too often with deceitful, manipulative sales practices.

So, that's the route we took and the reasons we took it. And with that kind of an approach, serving not only our clients that way, but our own employees who we began hiring over time, we ended up building the largest investment management financial planning firm in the country, where we won numerous “best places to work” awards.

We were ultimately named the best firm in the country according to Consumer Reports. We were ranked the Number One firm in the nation by Barron's multiple times. I was ranked the number one advisor three times. The firm is still today ranked the Number One firm in the nation seven years in a row.

So that's the path we took. And it resonates really well with investors and consumers. And I think that that's the route you ought to take if you're seeking a financial advisor. Someone who is a fiduciary. I can tell you this. That over the past 38 years, since we began our practice back in 1986, the quality of the financial planning profession has grown immensely.

And you are now far more likely to encounter a fiduciary than ever before. It is far more likely that your advisor is serving as an advisor than not. And how do you find out? It's real simple. It's real easy. Ask them: “Are you a fiduciary? Yes or no?” If they are a fiduciary, then ask them to give you a copy of their form ADV.

This is the federal disclosure document that all fiduciary advisors have to file with the SEC or their state regulator annually. They're also required by law to give it to you when you become a client and to offer to give it to you on an annual basis. Just ask them: “Show me your ADV.” If they can't show it to you, then they're not a fiduciary.

End of story, go find another advisor. So that's why we did it the way we did it. And that's what we would encourage you to seek out as a consumer investor. And if you're an advisor, this is the path we encourage you to take in your professional capacity. So again, thank you, Alexandra, for asking that question.

We've been spending, all of last month, as you know, on the political election campaign season. And, to the exclusion of virtually every other topic. A lot has been happening in the world of crypto. I've been getting some questions from folks saying, Ric, you haven't said a word about crypto lately.

Well, let me do that now. Let me tell you all the amazing things that are going on in the field of crypto, because it's been just a huge amount of information and content as crypto is continuing its path toward complete mainstream.

PayPal, for example, is now letting its business clients buy, hold, and sell crypto. PayPal is used by hundreds of thousands of merchants, serving its hundreds of millions of consumers around the world. And now you can, not only as a consumer buy bitcoin on PayPal, you can now use it to buy goods and services and the businesses are allowed to now hold bitcoin in their accounts.

A big competitor of PayPal is Stripe. And Stripe has now once again declared it's going to support online payments using crypto. Stripe used to do this, but stopped way back in 2018 because Stripe was worried about crypto volatility. That's no longer a concern thanks to stablecoins. And Stripe is once again engaging with crypto, which they haven't done in six years. And now they're making it available to their hundreds of thousands of businesses coast to coast. And of course, they're doing this to keep up with PayPal.

And this is just demonstrating that the snowball gets rolling, because as one major company engages its competitors recognize they don't have a choice but to engage or they're going to lose a lot of business. And just to illustrate, just to put a stamp on this of how powerful this whole situation is, Stripe recently bought Bridge. This is a stablecoin platform and Stripe just bought Bridge for $1.1 billion. This is not only Stripe's largest acquisition ever, it's the biggest crypto deal ever. Who would have thought just a few years ago that a crypto company would be worth a billion dollars. That's a pretty big deal.

Also in the financial services payments industry is Swift. If you have ever wired money from one bank to another, or from one country to another, you've done it through SWIFT. What Is the SWIFT banking system? The Society for Worldwide Interbank Financial Telecommunications. SWIFT is the payment system that is the default system used by the global financial system. And SWIFT has announced that they are now going to test digital asset transactions with banks in 2025.

It's the first time that they're going to be doing real world settlement testing in North America, Europe, and Asia. And yes, there's more. Visa and MasterCard. Visa has now developed a product that will help banks issue tokens on the Ethereum blockchain. And one of the first financial institutions that's going to use their new platform is a bank that's in Spain. BBVA, one of the largest banks in Spain is going to be engaging in this new product with Visa first off.

Like I said, when Visa does something, MasterCard has to do something too. Well, MetaMask is an online, DeFi platform that has 30 million active users. And they've now partnered with MasterCard to launch the MetaMask debit card. It's just yet another example of how TradFi, traditional finance, is merging with crypto. Another example, the big Italian bank, Banco Sella. They're now offering its customers bitcoin trading services through its mobile platform. Yeah, you can use your phone to access your bank in Italy and use it to buy and trade bitcoin.

Here in the U. S., the SEC has been pretty active giving even more and more approvals in the crypto space. They said yes to the bitcoin ETF last January and they said yes to the Ethereum ETFs this past summer. Now they've given a crypto company called TZERO, they've given them approval to custody digital assets. It's only the second firm to get this approval from the SEC. The first was Prometheum last year.

The SEC has also granted the Bank of New York permission to custody crypto too. This is a huge deal. Bank of New York, the oldest bank in America, founded by Alexander Hamilton. Now Bank of New York has been granted exemption from a rule called SAB-121, which is a major rule pertaining to bank regulation regarding its custody of crypto. SAB 121 is pretty much prohibiting banks from custodying crypto. Bank of New York (BNY) just got an exemption. So, it doesn't have to observe SAB 121. The SEC said to BNY, you go ahead and do it. Don't worry about the rule.

The SEC has also been very active in saying yes to options trading. They have said yes to BlackRock's Bitcoin ETF. The symbol is IBIT. Now investors can trade options on the ETF, just like investors can trade options on stocks. This is only eight months after the SEC said yes to the SpotBitcoin ETF. So it just shows how fast the industry is moving to develop new products and new trading opportunities for investors.

The SEC has also approved the New York Stock Exchange and CBOE, the Chicago Board of Options Exchange. The SEC has approved their request to trade options on the bitcoin ETFs. The SEC also gave the okay to Nasdaq. So, everybody, everywhere is getting in on the options trading activities within crypto. And all these options are tied not just to BlackRock's bitcoin ETF, but also to Fidelity's, Grayscale's, VanEck's, and others.

And yes, there's more. Janus Henderson, you know, is a big fund company, $360 billion in assets. They've just announced they are going to begin tokenizing securities. They're going to do this first with the Anemoy Liquid Treasury Fund, which invests in T-bills. They're joining the party. BlackRock Fidelity and Franklin Templeton are already doing this.

In fact, Franklin, which was the first to offer a tokenized treasury fund the on-chain U. S. government money market fund, they've now expanded their on-chain money market fund to add Coinbase's blockchain called BASE. By adding BASE to their list, you know, this is a $400 million fund. It's already available on a bunch of blockchains: Stellar, Aptos, Avalanche, Arbitrum, and I think, Polygon. Now they're adding Coinbase's blockchain as well.

And by the way, if you're a crypto nerd like me, you know that Coinbase's BASE blockchain is a layer two blockchain. In other words, Franklin Templeton's move to add BASE to availability for its tokenized treasury fund. This is the first time an asset manager has put a fund on a layer two blockchain.

And in case you're not a crypto nerd like me, what am I talking about? A layer-2 blockchain sits on top of other blockchains.  Ethereum is a layer-1 blockchain, a layer-2 sits on top. A better example, your smartphone, right? That's a layer-1. You know, when Apple created the smartphone, that's a layer-1 product. But the app that you go to the Apple app store and you download onto your phone, that's a layer-2 because the apps are sitting on the phone. Without the phone, you can't have the apps. So, the phone is layer-1. The apps are layer-2.

Same kind of thing in crypto. Ethereum is a layer-1. That's the core blockchain. Other blockchains sit on top of the Ethereum blockchain and they become layer-2’s because they're sitting on the layer-1. Well, why are they doing that? Why would a blockchain sit on another blockchain? Because by using basically the infrastructure of the layer-1, they can now focus on what it is they do, and what they do is better than layer-1. These layer-2 blockchains can execute transactions faster and cheaper than Ethereum can itself.

So, this is the first time Franklin Templeton is using a layer-2 blockchain to make available its on-chain money market fund. This is just demonstrating further growth and development and the integration of TradFi with TechFi. And this is causing a lot of folks to pay attention to the investment opportunities here.

Bitcoin is, around its all-time high once again. Remember the crypto winter just a couple of years ago, bitcoin was down as low as $15,000. It's now over $60,000. It's been pushing $70,000 recently. Huge increase in just a couple of years. So, a lot of folks are looking to invest, including institutional investors.

Emory University has just invested $15 million into bitcoin using the Grayscale Bitcoin Mini Trust. The Japanese investment firm Metaplanet, they just bought another $10 million worth of bitcoin. They now have a total of $74 million invested. They're using bitcoin as a treasury reserve. In other words, big corporations have a lot of cash. They normally park that cash in treasuries. They call it cash reserves, or treasury reserves. Now this Japanese investment firm is saying, we're not going to park our money in cash. We're going to park our money in bitcoin, just like MicroStrategy does. MicroStrategy is the largest corporation in the world that owns bitcoin and they own over $10 billion worth of bitcoin. This Japanese investment firm is following in its footsteps.

So is the South Korean national pension fund. They have announced that they just invested $34 million into MicroStrategy. They're not buying bitcoin directly. They're buying MicroStrategy stock because MicroStrategy is basically a proxy for bitcoin. They own so much bitcoin, about 1% of the world's total, that owning shares of MicroStrategy is pretty much the same thing as owning shares of bitcoin in their perspective. So, if you don't want to buy bitcoin directly, you could consider buying stock in MicroStrategy if you want to do that.

In fact, the SEC has now approved the first single-stock leveraged ETF for MicroStrategy. In other words, if you invest a dollar into MicroStrategy, you now own a dollar worth of it. But if you buy this new ETF, which is a leveraged ETF, for every dollar you invest, you own $1.75 of MicroStrategy, which means ff the stock goes up, and you own the stock via the ETF, you would make a lot more money than if you were to own the stock directly. Of course, if it goes down, you're going to lose a lot more as well. So, you know, leverage works both ways, but the fact that the SEC has approved this ETF just demonstrates the expansion of product availability and investment optionality that's available in the marketplace today.

It's even gotten to the point that next month, Microsoft shareholders are going to vote on a proposal to do the same thing. Should Microsoft put its cash reserves, which is billions and billions of dollars, should they put their cash reserves into bitcoin instead of T-Bills? You know, the same way that MicroStrategy does. The same way that now the investment firm Metaplanet is doing in Japan. Should Microsoft do this? Well, quite frankly, I don't think Microsoft is going to vote to do that. Management has encouraged its investors to vote the proposal down, but the fact that it even came up, that's a huge milestone for bitcoin.

This means you're going to see this proposal come up with other major corporations as well. And soon enough, that snowball is going to start accumulating. It's even gotten to the point that, guess who has now said everyone should absolutely own bitcoin. Susie Orman. Yeah, she said it on CNBC, that everyone should absolutely own bitcoin. Well, if even Susie Orman is in on this, you know that that's something noteworthy. My goodness, is this the first time in history that Susie and I have reached agreement on something?

And what about institutions an] professional investors? Well, every quarter, institutions have to disclose to the SEC what they're buying, what they're owning. It's called a 13F filing. These are public filing documents with the SEC so that everybody has full disclosure of what pension funds and endowments and big corporations that are publicly traded are all doing with investors dollars. And according to the latest 13F filings, in the second quarter, 274 institutional investors made their first investment into bitcoin.

This is really noteworthy. More and more and more big institutional investors are engaging. There's a limited fixed supply of bitcoin available. Only 21 million will ever be created. So, the more the demand increases, the higher the price has to go. Simple supply and demand equation.

And for those who still persist in wringing their hands over all of this, saying “Oh, but the only thing bitcoin is good for is illicit activity.”  I mean, go listen to Paul Krugman, who writes for the New York Times, go listen to Elizabeth Warren, who's a huge bitcoin hater. And they repeatedly, persistently say: “Oh, the only thing this is good for is illegal activities.” Really? According to the most recent data, bitcoin's engagement in illicit activity is now 0. 34 percent of all transactions involving bitcoin.

In other words, a tiny, tiny fraction, a 1/3 of 1% is the extent to which bitcoin is used inappropriately, such as money laundering or, tax evasion or you name it. Most of the illicit activity according to the FBI is $100 bills. Yeah, the FBI now says that a third, 33%, not 0.33, but 33% of all a hundred dollars bills are used by criminals and tax cheats. So, every time I hear somebody saying that they don't like bitcoin because it's used for illicit purposes, I keep wondering why haven't they banned $100 bills if they're so worried about illicit activity? About $2 trillion dollars is laundered globally every year. But only one half of one percent of all the global money laundering is connected to crypto.

So, we really need to put that old saw to rest because it simply ain't true. It might have been true back in 2013, you know, 11 years ago, but it ain't true today. It's kind of like saying the Model T was a ridiculously dangerous vehicle and therefore nobody should own a car. You know, that was true in 1920. I'm not sure it's true in 2024. It's even to the point that companies outside of the financial industry have begun to recognize the power of blockchain technology.

The most recent example, and my final one for you today, Rolex. Rolex has just received a patent to use blockchain technology to store information about its watches. Using blockchain technology, buyers are now able to verify the authenticity and history of each watch. It not only helps assure you if you're going to buy a used Rolex that this is a legitimate Rolex, not a fake, but it also gives you the complete provenance. It tells you the repair and maintenance history of the watch so that you know who the prior owners were and how well did they take care of the time piece. It also allows you through this blockchain technology to communicate with Rolex when you need warranty work.

Rolex using blockchain technology? This demonstrates the use case potential for this new tech. New? It's only 15 years old. And why this is going to grow at a massive clip over the next decade. So I remain as enthused as ever about crypto. I'm investing as much as ever into crypto for Jean and me personally. And we are still continuing our efforts to educate folks about crypto because of the incredible importance this new technology represents to global finance and commerce on an unprecedented scale.

It's internet 3.0. You missed the first Internet, the Internet of people. You missed the second Internet, the Internet of things. You don't want to miss the third Internet, the Internet of money.

And money makes the world go round.

If you like what you're hearing, be sure to follow and subscribe to the show, wherever you get your podcasts, Apple, Spotify, YouTube, and remember leave a review on Apple podcasts. I read them all. Never miss an episode of The Truth About Your Future. Follow and subscribe on your favorite podcast app.  

I'll see you tomorrow.

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Links from today’s show:  

Click here for Ric's worksheet to help you evaluate the candidates

The 34 Issues of Election 2024 – The Daily Podcasts https://thetayf.com/blogs/this-weeks-stories/tagged/election-2024

Kamala Harris Official Campaign Website Policy Page: https://www.kamalaharris.com/issues/

Donald Trump Official Campaign Website Policy Page: https://www.donaldjtrump.com/platform

11/13 Webinar - An Innovative Way to Generate Income in a World of Declining Rates: https://www.thetayf.com/pages/november-13-2024-an-innovative-way-to-generate-income

10/9 Webinar Replay- Crypto for RIAs: Yield, Staking, Lending and Custody. What’s beyond the ETFs? https://dacfp.com/events/crypto-for-rias-yield-staking-lending-and-custody-whats-beyond-the-etfs/

Certified in Blockchain and Digital Assets including Crypto Taxation Course/Webinar: https://dacfp.com/certification/

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